US Treasury slaps sanctions on ‘notorious’ virtual currency portal

Tornado Cash accused of enabling huge money laundering
Aug 08, 2022

The United States Department of the Treasury’s Office of Foreign Assets Control (OFAC) has imposed sanctions on a virtual currency mixer Tornado Cash, which has been used to launder more than $7 billion worth of virtual currency since its creation in 2019, the US government said in a release on Monday.

It said the money laundered through Tornado Cash includes over $455 million “stolen” by the Lazarus Group, a hacking group sponsored by North Korea, in 2019.

Tornado Cash was subsequently used to launder more than $96 million of malicious cyber actors’ funds derived from the June 24, 2022 Harmony Bridge Heist, and at least $7.8 million from the August 2, 2022 Nomad Heist, the US Treasury Department said.

“Today, Treasury is sanctioning Tornado Cash, a virtual currency mixer that launders the proceeds of cybercrimes, including those committed against victims in the United States,” said Under Secretary of the Treasury for Terrorism and Financial Intelligence Brian E. Nelson.

“Despite public assurances otherwise, Tornado Cash has repeatedly failed to impose effective controls designed to stop it from laundering funds for malicious cyber actors on a regular basis and without basic measures to address its risks. Treasury will continue to aggressively pursue actions against mixers that launder virtual currency for criminals and those who assist them.”

A release from the Treasury Department said that it has worked to expose components of the virtual currency ecosystem, like Tornado Cash and Blender.io, that cybercriminals use to obfuscate the proceeds from illicit cyber activity and other crimes.

While most virtual currency activity is licit, it can be used for illicit activity, including sanctions evasion through mixers, peer-to-peer exchangers, darknet markets, and exchanges, it said adding that this includes the facilitation of heists, ransomware schemes, fraud, and other cybercrimes.

What is Tornado Cash

Tornado Cash (Tornado) is a virtual currency mixer that “operates on the Ethereum blockchain and indiscriminately facilitates anonymous transactions by obfuscating their origin, destination, and counterparties, with no attempt to determine their origin,” according to the Treasury.

A mixing service mixes potentially identifiable or “tainted” cryptocurrency funds with others, so as to obscure the trail back to the fund’s original source. However, the supporters of Tornado Cash call it a privacy protocol.

Tornado receives a variety of transactions and mixes them together before transmitting them to their individual recipients. While the purported purpose is to increase privacy, mixers like Tornado are commonly used by illicit actors to launder funds, especially those stolen during significant heists.

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